What Everybody Is Getting Wrong About The New President Of France

So Sarkozy is out, and socialist Francois Hollande
will take over in a few days as the next President of France.

Hollande's victory is causing a lot of brow furrowing due to the
fact that he's anti-austerity, not eager to reform the pension
system, and favors higher taxes on the rich.

In short: He seems like a standard-issue European socialist.

So people seem tthink that Hollande is living in some fantasy
world, where he'll be able to conjure cash out of thin air, and
ignore the bond market's demands for cuts.

This is the wrong way to think about it, and people shouldn't be
so alarmed.

The fact of the matter is that there's no example in Europe, yet,
where the bond market has rewarded austerity.

Take Spain: It recently announced fairly severe reform plans, and
yields just shot higher. So there's really no reason to care much
about French domestic policy at this point.

What matters in the Eurozone is Eurozone politics and ECB policy.
So for example, what has worked (to some extent) have
been the ECB's 3-year LTROs, which have certainly calmed the
banking system down. And what might work is a move
towards greater establishment of transfers, fiscal union, and
Eurobonds. And on that stuff, Hollande is on the right side.

So forget his domestic policies. They're not at the heart of the
matter, and there's no reason to think that his course will make
a huge difference one way or another.

Just focus on Hollande as a force to break up the "Merkozy"
establishment, and perhaps take Europe away from the current
destructure policies which have exacerbated the debt crisis,
while also further pushing countries deeper into recession.